According to the Texas Attorney Hotline, the answer is yes. They are under a lease agreement and should continue to pay the rent. They are obligated by the lease agreement. However, with that said ,they should also file notice and move out before the home forecloses.

Unfortunately, This has happened recently to two of our tenants. They started receiving notices that the home was going into foreclosure. The sellers were not honest with us about their situation and we sent the rent to them every month as we were obligated to do.

All we can do as a Property Manager is work through the situation and refund the full deposit to the tenant when they move out.

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Platinum Properties&Management

A full service brokerage with Home Sales, Commercial Buying & Leasing, Land Purchases, Leasing & Property Management

PROPERTY MANAGERS SINCE 2006

Russell & Tracy Lee Parker

RE/MAX DALLAS SUBURBS II

(972)365-7198 Tracy Lee (214) 477-5609 Russell

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It's too bad when the owner is not making mortgage payments and the renter is paying the rent. I think the owner shouldn't be able to get away with NOT paying their mortgage and pocketing the tenant's hard earned, which will eventually have them out on their ear. Pity.

Tough situation. Since the lease contract is between the owner and tenant I understand that the owner's default on the mortgage doesn't relieve the tenant from their obligation to pay rent. After all they are living in the property. But, I wonder if the lease agreement had a stipulation something like: "landlords default on the mortgage invalids the terms of this lease" could provide some relief to the tenants?

In CA we use a Deed of Trust and Assignment of Rents. It's different from a mortgage. After a Notice of Default is recorded the lender can collect rents from the tenant directly. They usually don't unless it's a big commercial property.

Tracy Lee: Although I think it is very wrong of the sellers to be doing this... as they are misleading the tenants... as it could end up with some unfortunate consequences. The rental agreement is between the tenant and the home-owner... even if the home-owner is not making the mortgage payments.

One major problem that could develop is that the home may go into foreclosure while the tenant is living there. What a horrible surprise for them to find the local sheriff at the door... with a notice to vacate immediately.

Hi Tracy Lee. Talk about a tenant being between a rock and a hard place... Any landlord that allows this to happen should be penalized severely. For that landlord to not notify their tenants of the problem(s) is inexcusable. It is amazing how some people treat people in general; let alone those who trust and depend on them.Bruce

Yes because they have an agreement to do so...But , what if they don't? The landlord has one foot out the door already and needs the other foot to keep from falling. Here is a wild card to consider as well. Does the NOD notice of default bring into question the ownership rights? The trustee is challenging that pre-agreed to position by filing the notice of default....good post here

While it would be tempting to not make a rent payment if the owner was not making a mortgage payment, remember the contract (lease) is between you and the landlord, not you and the landlord's lender. And I'm sure there's not a solid, legally defensible way to make a case that you didn't need to pay YOUR rent simply because the owner of the property was not current on his mortgage.

If there is an issue with the owner/landlord, it should be dealt with in the appropriate context, legal or otherwise. Withholding rent does not imply the real matter (where you are going to live once the home is foreclosed) is being addressed.

Tracy~ great post & comments. I think the thing that gets lost in translation, "commitment", just like the owner of the building has a commitment, so does the tenant. Renters have rights just like property owners, if a renter or property manger has an issue, small claim court is the perfect solution. Owners must abide by the laws, just like renters and property managers!

No one ever wants to be a lout by not paying the rent, just like no one wants to get screwed-over!

Tracy -- interesting that you should bring this up -- have a client who is trying to buy the house he is renting, and he is concerned that the homeowner is not making the mortgage payments. I told him, keep making the rent payments-- don't kneed to have that clunker in the process of buying.

In AZ the lease will survive a foreclosure, and if they are paying "market" value for the home and up to date on lease payments, they can stay in home till the end of their lease, per the AZ Landlord Tenant Act. They may have a hard time getting back their deposits, but the new owners, be it a bank or new owner who picked it up at trustees sale will not have the deposts to give back. Problem is most tenants stop paying rent when they find out owners home is going to foreclosure.

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